Mortgage Forecasts Raised for 2024 & 2025: MBA
Rebound in originations will be steeper than expected a month ago.
The latest monthly forecast from the Mortgage Bankers Association raises its prediction for originations in the coming year by 3.6% — its largest full-year upward revision in two years.
Generally MBA has been lowering forecasts with an occasional, minor lift. However, in its Nov. 17 forecast MBA raised its 2024 forecasts by 4% for purchases and 2.5% for refinances, compared with its Oct. 15 forecast. For 2025, it raised its forecasts by 3.7% for both purchases and refinances.
Next year is still the year when MBA expects year-ago comparisons will turn positive after declining from their 2021 peaks of $1.86 trillion for purchases and $2.62 trillion for refinances.
MBA left its 2023 forecasts intact, and expects purchases will fall 18% to $1.32 trillion, while refinances fall 54% to $314 billion.
Purchase originations are now expected to rise 15% to $2.02 trillion next year and 11% to $1.70 trillion in 2025.
Refinances are expected to rise 56% to $490 billion next year and 30% to $639 billion in 2025.
MBA’s forecast followed its Nov. 15 report that mortgage applications in the week ending Nov. 10 rose a seasonally adjusted 2.8% from the previous week — the second week in a row for an increase. The purchase index rose 3% and the refinance index rose 2%.
Joel Kan, MBA’s deputy chief economist, said mortgage rates were little changed on average through the week. The 30-year fixed mortgage rate remained at 7.61%, about 30 basis points lower than three weeks ago.
“Both purchase and refinance applications increased to the highest weekly pace in five weeks but remain at very low levels,” Kan said. “Despite the recent downward trend, mortgage rates at current levels are still challenging for many prospective homebuyers and current homeowners.”
Lawrence Yun, chief economist for the National Realtors Association, said Thursday that home sales will likely fall 18% this year, compounding a 17% drop last year.
“Twenty-year-high mortgage rates have held off home buyers,” Yun said. “There’s also a lack of housing inventory to sell, which means fewer opportunities for sales in the marketplace.”
Yun said the Fed should back off its monetary tightening posture following last week’s report that the consumer price index was flat from September to October.
“The 10-year Treasury yield is at 4.4%, which historically means mortgage rates could be at 6.4%, but they are much higher,” Yun said. “The bond market is forcing the Fed to pivot.”
Yun said the 30-year mortgage and Fed funds rates have likely crested.
“I believe we’ve already reached the peak in terms of interest rates,” Yun said. “The question is when are rates going to come down?”
Yun forecasts that interest rates will drop to between 6% and 7% by the spring buying season and anticipates that more sellers will enter the market.
“Builders are back on their feet, up 5% in newly constructed home sales year to date,” Yun said. “Builders can simply create inventory. In a housing shortage environment, builders are really benefiting.”
The NAR is expected to release its estimate of existing home sales on Tuesday.